Technological innovation may be the key to help nourish the world.
Food – the production, consumption and distribution of it – is generating a carbon footprint that has been overwhelming the planet. An estimated 22 percent of food produced for human consumption is lost due to poor transportation and harvesting practices before reaching retail markets. What we eat, and how that food is produced, not only affects our health, but also has a major impact on the environment.
And as the world population continues to grow , amid decreasing biodiversity in our food supply and diminishing agricultural land, producing sufficient food to feed people while ensuring the process does not negatively impact the environment is a tough act to balance.
Shen Ming Lee, author of Hungry for Disruption: How Tech Innovations Will Nourish 10 Billion By 2050, says the central question we need to answer is: how do we increase food production – both quantitatively and qualitatively – in an increasingly resource-scarce future?
“Time and time again, we’ve seen that technological innovation is a necessary path to advance an industry,” Shen points out.
She explains that the food and agriculture industry is no different and that nourishing the global population, while meeting environmental and economic goals, requires that we “harness the power of science and technology to create a more sustainable, nutritious and innovative food future.”
To address these challenges, the food and agriculture industry can leverage technology to create lasting solutions from fewer resources.
While AgriTech focuses on technical solutions – from farm to table – that optimize crop yields, FoodTech points to innovation that ensures food habits are sustainable. Together, the collective industry of FoodTech and AgriTech aims to reduce the burden on the environment while creating efficiencies via technology that benefit farmers, the planet and consumers.
When it comes to the opportunities these industries provide, Frédérique Carrier, managing director, head of Investment Strategy at RBC Wealth Management in the British Isles and Asia, emphasizes the need to understand the underlying trends and technology that are tackling the issues of food insecurity and climate change.
“Instead of looking at just AgriTech and FoodTech and finding companies that fit these labels, understanding the growth trends and how companies will benefit from them is very important,” Carrier says.
She adds that the traditional ways in which the world has been producing and consuming food simply do not work anymore. “We have to factor in a growing population, less farmland due to urbanization and extreme weather patterns, which are not conducive for traditional means of food production.” All of this further highlights the importance of adopting new technologies to mitigate these problems.
Shen points out that food and agriculture is a complex industry but one that needs more people talking and thinking about it.
“Especially for those not yet really in the thick of food and agriculture, [investors] need to take the time to understand the nuanced issues that exist in this space,” Shen explains, adding that this will help them generate a return and make a positive social or environmental impact.
Carrier also turns the spotlight on systems and regulatory bodies that rate companies in this space according to their credentials. She suggests relying on experts and organizations with the right resources to evaluate and conduct due diligence that individuals may not be able to do on their own.
“You have to make sure that these ratings are not just ticking boxes, but that there’s really an understanding of how the business operates,” she explains.
Carrier highlights how technology can help deliver more with less: “solutions such as precision farming and gene technology can increase yields on agricultural lands.”
She says supply chain efficiencies are also hugely important, because more than a third of the food produced on a farm gets lost or wasted and these losses – due to supply chain inefficiencies – would be enough to feed three billion people. Solutions, including “cold chains” and smart packaging, can help optimize various stages along the supply chain.
Shen also lists other AgriTech innovations worth keeping an eye out for: the digitization and automation of farms – how the Internet of Things (IoT), artificial intelligence and autonomous systems like robots and drones will revolutionize the farm – and novel farming systems in which indoor farming technologies and smart-home micro-gardens aim to change the current framework of field farming.
In terms of FoodTech, both Carrier and Shen point to alternative proteins such as plant-based products, which have a much lower environmental impact.
Shen says, “Advances in synthetic biology and food science have allowed us to produce plant-based, cell-based and fermentation-based sources of protein to meet our increasing protein demands.”
According to Shen, novel food products – such as low-glycemic (low GI) products – that use biotechnology and highly functional crops, “will also bring a whole host of innovation opportunities.”
Our food choices can affect the environment. The food system underpinning the world’s current dietary patterns is responsible for approximately 21 percent to 37 percent of total greenhouse gas emissions , which is a major driver of climate change, even without considering other environmental effects.
Below are some suggestions from Shen on what consumers can do to reduce their carbon footprint:
The plate of the future is going to look vastly different from that of the present. Carrier explains: “plant-based proteins are likely to continue to gain market share as technology improves and prices fall.”
She believes food companies that acted on the opportunity early and invested in alternative proteins will have an advantage in terms of product innovation, processing technology and the distribution networks they use.
“Global, multi-brand food companies are starting to invest as well, and while their plant-based businesses are not yet big enough, they will keep growing,” Carrier says, adding that the valuation gap between plant-based alternative producers and these traditional food companies is expected to decrease somewhat over the years.
According to Carrier, the companies that develop sustainable technology (SusTech) to tackle the challenges will have secular growth opportunities. “Investors should be on the lookout for these companies and include some in their portfolios.”
Shen also expects food production to become more localized and efficient as a result of technological innovations such as agricultural robots, precision agriculture and indoor-farm technology.
And on the consumption front, she sees more people “eating with sustainability in mind, replacing meat consumption with meat alternatives or cultured meat, eating more local and seasonal and reducing how much food [they] waste.”
The material herein is for informational purposes only and is not directed at, nor intended for distribution to or use by, any person or entity in any country where such distribution or use would be contrary to law or regulation or which would subject Royal Bank of Canada or its subsidiaries or constituent business units (including RBC Wealth Management) to any licensing or registration requirement within such country.This is not intended to be either a specific offer by any Royal Bank of Canada entity to sell or provide, or a specific invitation to apply for, any particular financial account, product or service. Royal Bank of Canada does not offer accounts, products or services in jurisdictions where it is not permitted to do so, and therefore the RBC Wealth Management business is not available in all countries or markets.The information contained herein is general in nature and is not intended, and should not be construed, as professional advice or opinion provided to the user, nor as a recommendation of any particular approach. Nothing in this material constitutes legal, accounting or tax advice and you are advised to seek independent legal, tax and accounting advice prior to acting upon anything contained in this material. Interest rates, market conditions, tax and legal rules and other important factors which will be pertinent to your circumstances are subject to change. This material does not purport to be a complete statement of the approaches or steps that may be appropriate for the user, does not take into account the user’s specific investment objectives or risk tolerance and is not intended to be an invitation to effect a securities transaction or to otherwise participate in any investment service.To the full extent permitted by law neither RBC Wealth Management nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or the information contained herein. No matter contained in this material may be reproduced or copied by any means without the prior consent of RBC Wealth Management. RBC Wealth Management is the global brand name to describe the wealth management business of the Royal Bank of Canada and its affiliates and branches, including, RBC Investment Services (Asia) Limited, Royal Bank of Canada, Hong Kong Branch, and the Royal Bank of Canada, Singapore Branch. Additional information available upon request.Royal Bank of Canada is duly established under the Bank Act (Canada), which provides limited liability for shareholders.® Registered trademark of Royal Bank of Canada. Used under license. RBC Wealth Management is a registered trademark of Royal Bank of Canada. Used under license. Copyright © Royal Bank of Canada 2024. All rights reserved.
We want to talk about your financial future.